On 1 November 2019 changes to the Residential Tenancies Act come into effect. This post summarises the changes relating to excessive rent increases.
This change aims to protect tenants from excessive rent increases and ultimately make it more difficult for owners to increase the rent by more than the prescribed amount.
As has been the case in the past, the rent cannot be increased during a fixed term unless it is stipulated in the lease.
Outside of a fixed term, rent cannot be increased at intervals of less than 12 months.
Moving forward, it may be more difficult for a landlord to increase rent to market as the Act now stipulates that an increase is considered excessive if it is 110% on the housing component of CPI for Canberra. Given our low CPI rates at the moment, it is conceivable that many rent increases could be challenged at ACAT.
Let’s say your property rents for $500 per week and the end of your tenants fixed term is approaching. Other similar properties in the area are renting for $600 a week because the area has become very popular and there are few rental properties on the market and get snapped up very quickly. You would like to receive market rent, but also would like to keep the existing tenant, so you think $550 a week to be a fair amount. The tribunal would consider this excessive. If housing CPI is 3%, then an acceptable increase would only be $16.50, so a new rent of $516.50.
There are only 3 ways that a landlord can increase the rent more than the prescribed amount:
- the tenancies agreement stipulates the increase
- the tenant agrees in writing to the increase
- the landlord obtains the approval of ACAT
We think that ACAT would approve an increase above the prescribed amount if the landlord can prove that their costs have significantly increased since the rent was set, or since the last increase.